The value of bond defaults in China in 2022 has already more than doubled the full-year total from last year, as the accelerating debt crisis in the country's US$2.7 trillion property market spills over into other areas of the economy.
Defaults by Chinese issuers have exceeded US$20 billion so far this year, compared with about US$9 billion for all of last year, with property developers accounting for most of the defaults, said Augus To, deputy head of research at ICBC International.
"The defaults may be peaking this year," he said. "Uncertainties will linger on in the remainder of the year or even next year. Improvement may come, but will take a longer time to materialise."
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A total of 19 Chinese companies - 18 of them property developers - have defaulted in the offshore market so far this year, close to the whole-year total of 21 in 2021, according to Meng Ting, senior Asia credit strategist at ANZ Bank China.
For this year, she foresees a slightly higher default rate for both onshore bonds - rising to 2.2 per cent or 2.3 per cent from around 1.9 per cent - and in the offshore market, where she does yet have a specific projection.
Country Garden Holdings' Fengming Haishang residential development in Shanghai, pictured on July 12, 2022. Moody's Investors Service recently reduced the company from investment-grade territory in a sign of souring sentiment for private-sector Chinese developers. Photo: Bloomberg alt=Country Garden Holdings' Fengming Haishang residential development in Shanghai, pictured on July 12, 2022. Moody's Investors Service recently reduced the company from investment-grade territory in a sign of souring sentiment for private-sector Chinese developers. Photo: Bloomberg>
These predictions come as economic growth in the world's second-largest economy slowed to its lowest rate in two years, new home prices fell for the 10th straight month, and unfinished homes sparked a mortgage boycott movement - all against a backdrop of large fluctuations in global financial markets amid increasing interest rates and concerns of recession.
China's bank regulator on Monday instructed lenders to provide credit to eligible property developers to help them complete unfinished homes, opening the liquidity taps for the first time since an August 2021 central bank loans cap sent the industry into a tailspin.